Linc Energy fined as regulators step up enforcement effort of oil and gas companies

Alaska oil and gas regulators continue to pressure operators it says are violating permit requirements, including recently issuing a $20,000 fine to Linc Energy, a company exploring a coal gasification prospect in the Cook Inlet area.

As part of its stepped-up efforts, the Alaska Oil and Gas Conservation Commission is also investigating Hilcorp Alaska, a rapidly growing oil and gas producer in the state, for potential violations.

"They have not been fined to date, but that doesn't mean they won't be fined," said commission chair Cathy Foerster, referring to Hilcorp.

The commission has "ratcheted up" efforts to ensure regulatory compliance, especially with some of the smaller newcomers to the state that have had difficulty following rules, said Foerster.

Linc Energy was fined July 1 for "numerous regulatory violations" associated with not providing information related to three wells permitted for its coal gasification project near the community of Tyonek on the western side of Cook Inlet.

Coal gasification involves heating coal underground to produce a gas that can be used for power generation or to produce diesel fuels and other products.

James Strong, providing public relations for Linc Energy and based in Sydney, Australia, said the company will appeal the decision by the end of the month.

Linc Energy understands the well information from 2011-12 drilling season was submitted to the commission, Strong said in an email.

"We believe it may have been overlooked so we will raise it at appeal," he wrote.

The commission's order said Linc Energy did not submit "well inclination surveys, core analysis reports and digital log data."

Violations also occurred when the company did not respond to "several" requests from the commission for the information, according to the order, signed by Foerster and Dan Seamount.

Foerster said the commission regulates drilling that might result in the release of hazardous substances and create potential blowouts, such as in coal seams that can encounter methane gas.

At an informal conference in May about the issue, Linc Energy officials told the commission the company was acting in good faith.

But the order said that "contention is not borne out by the record."

Linc Energy must provide the commission with the well information by Aug. 1, or prove it doesn't exist. It must also ensure future work will follow all regulations and orders, the decision said.

Linc Energy has also been involved in a separate, better-known project in Alaska.

The Australian-based company is exploring for oil at a remote North Slope site known as Umiat, about 100 miles west of Pump Station 2 and the Dalton Highway. That effort has benefited from tens of millions of dollars in state oil and gas tax credits, including $53 million last year, according to Linc Energy's annual reports.

Foerster said in May the commission is finding that small, new operators in Alaska don't have the same emphasis on regulatory compliance as large, longtime operators. She said the commission will do "whatever it takes" to make compliance a high priority.

The commission this year has:

  • Levied a fine against Cook Inlet Energy, a subsidiary of Miller Energy Resources in Tennessee, $446,000 for numerous violations related to production from a well that lacked a working safety valve system required to prevent an oil spill or a gas release. The company has appealed the decision. The hearing is set for Aug. 4.
  • Fined Caelus Energy Alaska for violations that included failing to report a pressure communication in a well in spring 2014. The company took action to fix the problem and paid the $115,000 fine, Foerster said.

As for the investigation involving Hilcorp, Foerster would not provide details about the nature of the investigation or where it's taking place. The Houston, Texas-based company has operations in Cook Inlet and the North Slope.

Lori Nelson, external affairs manager for Hilcorp Alaska, said she did not have a response.

In addition to issuing fines, Foerster said the commission has increased meetings with company managers to make sure requirements are met.

The companies are responding, she said, noting that a top official with Hilcorp Alaska recently told her he had been hired to ensure compliance is not an issue.

"It appears to be paying off," she said.

Alex DeMarban

Alex DeMarban is a longtime Alaska journalist who covers business, the oil and gas industries and general assignments. Reach him at 907-257-4317 or